Looking Out From the Garage: November 2007

If you think I could let this one go, you have another think... And it is coming as fast as this thing was going.

For the second "video in a blog" post I HAVE to put this one up. The only connection to real estate is that I found it posted on Jay Thompson's (The Phoenix Real Estate Guy) blog. If you are looking for real estate in Phoenix, give Jay a shout... or give me a shout and I'll send a referral.  Jay is a fellow Active Rainer, as well as a good guy.  I know he's going to find this, because I'm on his subscribed list...  

So, without further ado, here is the video...

Now that you have seen a Lambo MP640 Murcielago going 219 mph on the streets of Phoenix, AZ, you can see that the video isn't that exciting. But, it is well put together.

Let me make several VERY strong statements.

• This is not responsible behavior. It would not have taken much for this Michael Schumacher wannabe to have wiped out himself and several other people. It would not have been pretty.
  
• There is NO time of the day or night that the roads around Atlanta are that empty. Especially in Gwinnett County.
  
• There ARE places where this feat could be replicated during daylight hours with the police looking on and cheering.
  

Is the Silver State Challenge still going on? There used to be an event on public (but CLOSED!!!) roads in Nevada where regular people could run as fast as they dared over a course that had some seriously long and straight sections.

In summation, I think it is great that this guy took his quarter of a million dollars and is playing with it like it should be... but I'm not nuts about it being done on roads that other people (the ones that didn't sign the waiver) are driving on.

If you are one of this guy's car buddies... and you are in the Atlanta area, give me a call. I can find a house where you can hide this car until it is painted...

GarageHomesUSA

So, it's like this...

First, the video is only 27 seconds long, so feel free to watch.  

Now, let me tackle the answer.  

Jamie, there isn't a quick and easy answer to the question, but it looks like you think there should be from your video.  But, let's look at the causes, and let's see if we can find some possible solutions.  

Causes:

• The fed, trying to keep the economy rolling after the terror attacks of 9/11 kept rates low.  Those low rates made a lot of people think about taking advantage of them to buy homes... lower rate, better payments. 
  
• Consumers decided to take advantage of that opportunity to not only buy houses, but to tap the equity in their homes while refinancing, since they could cash out, and keep the same payment. 
  
• Many of those consumers got greedy and wanted to get more than they really should have.  Instead of getting another 30 year fixed when they refi'd, they chose to go after something wilder and instead of 5.25% for 30 years, they got an interest only ARM for 2.5%... and then bought a bass boat and a new Tahoe. 
  
• Buyers got the same kind of greedy.  About the same time they figured out that they could get a $400,000 house with a real loan, they found out they could get a $600,000 home with a mortgage that they had no business being in.  But, they wanted it and didn't care. 
  
• Other buyers also got greedy, but in a different way.  They found out that they could get out of their apartment, and into a house without spending any money.  They could buy a house with 100% financing.  They didn't care about the terms... it was less than their rent. 
  
• Some mortgage brokers got greedy, too.  They put people into whatever worked for the moment without regard to the future ability to repay.  As soon as the loan closed, it was sold... so who cares.
• Some agents got greedy as well.  They actually suggested that buyers get something wild just to get a bigger commission. 
  
• Back to the fed... They raised rates in order to cool inflationary issues.  Those "exotic mortgages" started to get pretty exotic...

Solutions:

• Personal responsibility. 
  

Do you really think that any of the above things should be fixed by the government?  I mean really.   

• The fed was doing the right thing to respond to the financial needs of the country.  Technicians may argue about whether it was too much, too little, too early or too late... but it was the right strategy. 
  
• Nothing wrong with refinancing for a better rate.  Nothing wrong with taking out a little cash to make the house better. 
  
• When people start paying off credit cards things get a little gray.  As we move into Tahoes, bass boats, and vacations, we are leaving gray and heading towards dark.  Doing with an exotic mortgage product is just plain stupid. 
  
• Buying too much house because you just want to... and can find a mortgage product that will let you... just plain stupid. 
  
• As much as I like first time buyers, and want EVERYONE to own a home, some people just aren't ready.  Not understanding what you are committing yourself to is... not responsible.  (I won't say stupid, because first time buyers NEED a break, and they need the guidance of responsible professionals).
• I think that loan originators that don't care about the future of those that they pawn off crappy, unsuitable products upon are crossing an ethical line.  it isn't going from bad to good, either. 
  
• Agents... same thing. 
  
• Again, the fed did what they needed to do for the situation.  Same arguments as the first point. 
  

So, there is the answer to your question. 

Now, on to your point that you didn't ask a question about...

Why has your neighbor's home been on the market for six months?  

The price is wrong for the market, marketing, or condition.  It isn't the same real estate climate as two years ago.  The house needs to be priced where it belongs, not where they buyer hopes it will be.  Perhaps they can't afford to sell it at the price it should be at.  If so, maybe it is because they were covered above.  

The short answer is that as President, I won't do much to "fix" this problem.  I will, however, tell people that the government is not their Mommy, and they need to be responsible for their own actions.  If there is a surgical way to make the actions of greedy mortgage originators and real estate agents illegal, I'll pursue it.  But, as is often the case, broad legislation usually hurts more people than it helps.  

Is that my whole minute? 

>>>Woo hoo.  I posted a Youtube video for the first time<<< 

What?  Is this guy crazy?  Take a look...

S&P Index Reveals Price Changes in 20 Markets
Prices of single-family homes in the third quarter fell 4.5 percent nationwide compared with a year ago.

It was the largest drop since the Standard & Poor’s/Case-Shiller National Home Price Index was begun in 1988.

“We are fast approaching the rate of price decline seen at the end of the 1990-1991 recession,” Joshua Shapiro, chief United States economist at MFR, wrote in a research note. “The odds strongly favor blowing past this mark in coming months.”

Robert J. Shiller, chief economist at MacroMarkets and the founder of the index, says: “Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis. All 20 metro areas were in decline in September over August. Even the five metro areas that still have positive annual growth rates – Atlanta, Charlotte, Dallas, Portland, and Seattle – show continued deceleration in returns."

Here is the one-year change in the 20 metro areas included in the index:

• Atlanta: 0.4 percent
• Boston: -3.2 percent
• Charlotte: 4.7 percent
• Chicago: -2.5 percent
• Cleveland: -4.0 percent
• Dallas: 0.2 percent
• Denver: -0.9 percent
• Detroit: -9.6 percent
• Las Vegas: -9 percent
• Los Angeles: -7 percent
• Miami: -10 percent
• Minneapolis: -4.5 percent
• New York: -3.6 percent
• Phoenix: -8.8 percent
• Portland: 2.2 percent
• San Diego: -9.6 percent
• San Francisco: -4.6 percent
• Seattle: 4.7 percent
• Tampa: -11.1 percent
• Washington: -6.6 percent

Source: Standard & Poor’s (11/27/07)

Ok, the numbers aren't stellar.  But, Please note that Atlanta is up 0.4% annually.  I have been showing Gwinnett County to be even better than that.  Obviously, real estate isn't crashing here, but as mentioned in the article, appreciation is slowing.  I don't think it is going to slow much more on a year over year basis, but we always see a slowdown this time of the year.  

It's still nice to know that we came in fifth of the twenty largest metro areas.  It just goes to show that even in a weak market there are pockets of strength.  Please feel free to contact me with any questions.  Also, look for my Gwinnett County Market report early next week.

I had an interesting conversation.  it was interesting for many and varied reasons. 

• There were three people gathered in place that were familiar with my blog... and I was only one of them.
• Only one of them was familiar with Active Rain... me again.
• One of them was an honest to goodness consumer. 
  
• Nobody got punched... the Realtysaurus only pushed me a couple of times... ok, she didn't, but she wanted to.
• The path of the conversation was VERY interesting.

So, let me elaborate. 

Consumer:  "You look familiar to me."

Lane:  "I'm a REALTOR(R)."

C:  "I think I've read your blog."  

Lane:   "Cool... I DO have a reader!!"

blah, blah, blah...

C:  "So, how soon do you think real estate will turn around in Gwinnett County?"

L:  "Tough to say, but I think that the momentum is turning now.  Remember, we won't know it is turning until it has turned, since we can only look in a rear view mirror to see."

Realtysaurus:  "I couldn't help but overhear you talking about real estate.  I'm a REALTOR(R) here in Gwinnett County."

L:  <snicker, snicker>

C:  <looks at Lane and also snickers>

R:  "You look familiar."

C:  "I said the same thing.  It's because I've read his blog."

R:  "That's right... the garage guy." <eyes roll ever so slightly>

C:  "So, when do you think the market will turn in Gwinnett County?"

R:  "Oh, Sugar, it never slowed here.  We are great."

C:  "Are those the talking points you got from the NAR?"

L:  <more snickering>

C:  "I've seen the numbers on Lane's blog.  There is no mistaking that there has been a slowdown.  Is your research showing something different?  Do you have a blog?"

R:  <deer in headlights>  "I don't believe in that blogging.  It's giving away the milk for free.  Why should someone call me if I give away all of the secrets on the internet?"

C:  "Everything that you could possibly say is already out there.  But, people might call because they see you really know th e market."

L:  "Personally, I don't think I'm giving any real expertise away.  If I see a TV show that talks about building a house, that doesn't mean I automatically have the skills."

R:  "This isn't as tough as building a house."

C:  "Really!?!  It's easy work?"

L:  "No.  It just seems easy for us in the industry because we do it all of the time.  Just like the contractors that build houses, it is second nature.  But, the skills we employ, and the knowledge we have is far from second nature to those that aren't in the business every day."

C:  "That makes sense.  So, Realtysaurus, why is it you don't have a blog?"

R:  "Why buy the cow if the milk is free?  I don't think I should give away my knowledge to everyone on the internet thing...  And it seems to techy for me.  I have a website, though.  it has all sorts of local information."

Now, let me point out a few things.  The consumer was not someone that is in my target market.  I would be glad to sell her a house, and her husband loves the idea of a 4 car garage, but they are not really car-centric.  But, she stumbled across my blog while looking for something else.  She found what she needed on my site, as well as some other info that interested her.  She and her husband are not currently looking to buy a house, but in a couple of years they may downsize.  

The conversation went on for a few minutes.  The Realtysaurus excused herself... but not until mentioning things from my blog that lead me to believe that she read more than a few passing posts.  She wasn't happy that I have given away so much "milk"...  But, the fact remains that there is nothing we say that isn't being said by scores of outlets.  If we don't supply the information, others will.  And, it isn't the info that makes us valuable, it is the ability to act on it, interpret it, and maximize its potential.  None of that comes from a webpage.

Woohoo.  I have a couple of readers... ok, probably one less as of now.

Every once in a while, I need to wander off on a tangent. Tonight, while driving back from the initial meeting for volunteers at the NHL All-Star Game, I drove by Fat Matt's Rib Shack (and let's not forget the Chicken Shack next door). So... I got to thinking about some of the great places I have been lucky enough to eat at here in Atlanta. I know it isn't about real estate, but we live here... and we have to eat... and if we are going to eat, we should eat well.

I guess I should start with Fat Matt's. This is a legendary stop in Atlanta. Aside from ribs that are known throughout the South, there is live blues seven nights a week. The last time I stopped in, there was a tour bus parked outside. As a blues neophyte, I couldn't tell you who the musician was, but one of my guests was just about beside himself that a legend would bring his bus up from New Orleans for a one night engagement in a rib joint. Don't let the look fool you... this place rocks... er blues... whatever.

The chicken next door is also quite amazing. That would be Fat Matt's Chicken Shack. No live blues (that I know of), but BBQ chicken for lunch is certainly a treat.

The next one on the list is actually gone now. For decades there was a place in Atlanta called Deacon Burton's Soul Food Grill. It was the very definition of Southern Cuisine. Deacon Burton passed away a few years ago, and there was a lot of drama involving the restaurant. Born of the drama is a place called Son's Place. I have not been there, but I hear it is across the street and has faithfully captured the experience. The reviews are good as well.

As long as we are on Southern foods, let's hit another BBQ place. This one is right around the corner from me. Spiced Right Bar-B-Q in Lilburn, GA. It is good sweet BBQ. Again, it isn't fancy, but that doesn't mean it isn't good. They have half a dozen different sauces, and they are all good. On my last visit, I enjoyed the brisket... and some pulled pork... and some chicken. Ok, I had some rolls, too.

Finally, not too far away is a DeKalb County tradition... but it's pretty close to Gwinnett County as well. Matthew's Cafeteria in Tucker is a favorite destination for locals at lunchtime. Like Son's Place, they are a "meat and three" place (for those that aren't familiar, that would be meat and three vegetables or sides). Swinging by around lunch, and the lot is plugged with police cars, while there is a steady stream of traffic from Cofer Bros. Lumber across the street.

If you are an Atlanta local, especially around Gwinnett County, I hope that you have a few new ideas for lunch or dinner in the next couple of weeks. If you don't live in Atlanta, drop in for a visit. Buy a house. I'll even take you to lunch...

So, what does that mean? First, let me toss out the original story.

Daily Real Estate News | November 21, 2007

Home Starts Up, Mostly Due to Multi-Family
U.S. home builders broke ground on more apartment buildings in October, driving housing starts up 3 percent to an unexpected seasonally adjusted rate of 1.229 million, the Commerce Department reported Tuesday.

But builders trimmed permits for future building projects by 6.6 percent. They also cut back 7.3 percent on single-family homes to a seasonally adjusted annual rate of 884,000, the lowest level of single-family home building since the last recession in October of 1991.

The levels varied regionally. Home starts in the Northeast rose 8.5 percent overall, and starts of single-family homes rose 29.5 percent. Single-family starts in the Midwest were up 15.1 percent with the overall increase at 21.1 percent.

In the South, overall starts dropped 4.6 percent and single-family starts fell 19.5 percent. Starts in the West rose 5.8 percent overall but single-family home starts dropped 8.1 percent.

Source: Thomas Financial, Dennis Moore (11/20/07)

Here is the link to the story from the NAR.

Of course, I want to focus on the numbers for the South. Starts are down by 4.6%, but SFR (Single Family Residential) Starts are down by 19.5%. That tells me that MFR (Multi-Family Residential) is well up. Why would that be? Well, MFR is another way of saying rental property. So, if builders are getting more orders for rental properties, the buyers are confident that they will be able to fill those units. It also means that buyers are confident that they will be able to pay off those units with the tenants moving in to them.

I have previously mentioned that it was looking like rents were expected to increase faster than previously expected. The "Sub-Prime Mortgage Meltdown" would be the main reason. People that were on the edge of affording a home before the SPMM are out of the market now. That increases demand on rentals... until the supply catches up, the price will rise.

So, let me sum this up into a nice, neat package.

• If you are a credit-worthy buyer, this might be a good time for you to exploit that. The market has a LOT of inventory, and deals are to be found.
  
• If you aren't buying, look for rent to go up.
  
• If you don't know if you are able to get credit, talk to a reputable mortgage broker. They can tell you if you are able to qualify for something, and what the terms will be.
• Rates are still incredibly low.
  

I am a long way from saying that everyone needs to rush back in to the real estate market. If your credit is shaky, I would recommend you sit on the sidelines a while longer while fixing your credit and building up some cash. I would also still counsel you to talk with a mortgage broker. A good mortgage broker can tell you the real ways to increase your credit scores.

If you need any referrals to a good mortgage broker, feel free to contact me through my website.

Thanksgiving is a time that we look back over the year and think of all of the wonderful things that we have to be thankful for.  It is also a time for us to enjoy being with our families.  And, being with family always gets the wayback machine firing on all cylinders...

So, while I was talking with my Mother about Thanksgiving meals, a few interesting things came up... not the first time.  

I have spent my adult life being less than traditional.  My ex-wife and I used to host our "Orphan Thanksgiving" feast every year.  We had all of our friends... and their friends... that didn't have other family in town over for the Thanksgiving meal.  We had some pretty big crowds.  In order to satisfy the numbers, we often had other things with the turkey... like hamburgers, hot dogs, and lasagna.  We would have a lot of the traditional foods, but there were always some "bonus foods."

After we divorced, I kept that little tradition alive for a while.  I had friends over, but we skipped the turkey altogether.  Pizza was the most prevalent dish served.  Of course, the grill was fired up on occasion as well.  Nothing says Thanksgiving like a grilled hamburger or hot dog. 

Fast forward to this Thanksgiving...

The rest of the extended family was out of town.  So, my lovely wife, beautiful child and I sat down for a Thanksgiving meal of... breakfast burritos.  Not even turkey sausage in the burritos.  

Of course, once again, my Mother was convinced I had committed a sacrilege.  But, this is the same woman that used to make 20 courses for Thanksgiving... half of which NOBODY would eat.  All in the name or tradition.  Nobody wanted the mincemeat pie... but she made it for decades.  (She goes out to eat with my step-father now).

"So, Lane, does this have ANYTHING to do with real estate?"

Since you asked... yes, yes it does.  

There are a lot of things that real estate agents do because they are traditional.  I do some of them occasionally, too.  We hold open houses, place newspaper ads, fax things to people, and talk about being number one in customer service in our ads. 

But, those aren't always productive.  Open houses don't sell houses.  Newspaper ads are shown to be a weak draw for a property (at best).  I am working to be paperless, since all of the faxes make more paperwaste than anyone outside of this business can imagine.  And, "1 is NOT the loneliest number" anymore... every agent in the country is number 1.  

But, that is the way many agents have always done business.  

According to the NAR, about 4% of us blog.  Despite attending the convention last week where EVERYONE was talking about blogging, I don't think more than 10% ever will.  And that will take a decade.  

Customer focused websites?  Client focused marketing?  Rare at best.  As an industry, we have gotten in to the habit of putting ourselves at the center of our universe.  

It's a tradition. 

If you are looking for a non-traditional agent, one that isn't afraid to turn things upside-down for better results, let me know.  

GarageHomesUSA.   

And a big step it is. 

I picked up a tablet computer a few years ago.  Seduced by the cool marketing and all of the smurfy cool junk I would be able to do, I plunked down enough money to buy a decent parts car for a little silver swiveling box.  So, I got it home and figured out I had a good laptop with some extra functionality... but couldn't do all of the cool junk I saw on the commercials.  What's worse is that I couldn't do the main thing I wanted to do... sign the stupid forms on the computer. 

So, I started on my little quest.  I found a few windmills to tilt at, and asked people... a lot of people... people that worked for "paperless companies" how I could have a client sign a contract on the screen of my tablet computer.  I was told that I needed to have the document printed out (like that is paperless) and they could sign it, and I could then scan it into a PDF, and boom... I would have it all...

Well, isn't the point of a paperless transaction to NOT MAKE ALL OF THE STUPID PAPER?  Seriously, I have had deals where I had 10 different copies of the same contract with different combinations of signatures, as well as in different levels of clarity from the repeated scanning and faxing and printing.  The client had a few... the other agent had some more... and their client had a couple, too.  So, basically we killed a small tree to sell the house.  Even the paperless solutions weren't so paperless.

There had to be a better way.

So, off the the Atlanta Board of REALTORS(R)/FMLS Showcase Expo... no luck.  I was told that if I bought a signature pad, they had a software package... blah, blah, blah... monthly fee of <eyes have glazed over... I have a tablet.  I can write on the stupid screen>.  So, let's try the NAR Convention and Expo.  There were 8.2 million exhibitors... and again I was told that the way to go paperless was to print the document and sign it, and then scan it back in.  Or, I could use a digital signature... ok, I called a couple of clients... they want to have their fancy handwriting on the document, not an asterisk that says they "signed it... really, it was them".  I was told it was good enough for the Post Office... heck, they won't admit to being government employees, even while paying into a government pension system.

Back in Atlanta... Where oh where can my solution be?  In my bookmarks.  I found it three years ago, but didn't realize it.  PDF Annotator had the capability (they didn't then, but when I looked back today, they did).  So, I now can stick my tablet/laptop convertible computer with a PDF in front of someone and they can sign it right there... in blue "ink".  I can then "melt" it into the page, and it can't be stripped off.  I'm going to talk with a few closing attorneys about the technology to make sure there won't be any problems at closing, but I think I have found the grail.  

Adding OneNote, PDF Annotator, and the tablet together, I am moving towards a slightly less paper cluttered workspace.  Maybe now my wife will let me get the film scanner so that I can get all of those cool... I mean cluttersome... negatives and slides scanned in.

I've been watching some of the NBC and CBS coverage of the Macy's Thanksgiving Day Parade.  My wife is a (semi)reformed band geek, so she wanted to see the parade.  Also, since WCC (World's Cutest Child) likes parades, we had a triple reason to tune in (1 for the wife, and 2 for the kid).  

So, we tuned in, looking forward to seeing some floats and some bands.  But, what do we get?  Broadway show tunes and promos for upcoming NBC shows...  Maybe CBS will have some of the actual parade...  Nope.  Instead, the cast of CBS's Daytime programming just "drop by" for a chat... between musicians promoting their new albums.

So, for both of the broadcasts of the parade, all they did was self-promote and show commercial acts.  Stephenson High School from Stone Mountain got about 10 seconds on CBS.  I think they got almost 20 seconds on NBC... just enough to say who they were... and hear a VERY short clip of music. 

I think that both of these networks have forgotten what the parade is about.  While one could certainly argue that it isn't a non-commercial event... sponsored and even owned by Macy's... it isn't PURELY a commercial event.  It is a Holiday Event.  Don't the kids that raised thousands of dollars to travel to the parade to perform, because they thought it would be an honor, deserve more than a passing mention on the way to professional performers that are their to promote their latest product? 

One thing that was mentioned on CBS in their short mention of the Stephenson High School Marching Band is that the graduating Seniors have garnered $10,000,000 in musical scholarships for college.  If they read the teleprompter right... all I can say is WOW!  Congrats to the Stephenson High School Marching Band for getting to the Macy's Thanksgiving Day Parade AND The Rose Parade.